A recent trend in bank failures has shaken investors. But US stock markets rebounded after Treasury Secretary Janet Yellen said the US government would protect deposits in any further collapses.
In the UK, the FTSE closed 1.79% higher after gains in top bank shares.
NatWest, Prudential and Barclays shares gained about 5%, while Standard Chartered and Lloyds also traded higher.
Ms Yellen said "the situation is stabilising, and the US banking system remains sound" in a speech on Tuesday.
This comes in the wake of Silicon Valley Bank and Signature Bank collapses earlier this month.